Trump defends decision to revisit action on Chinese company

(Photo by David Ramos/Getty Images)

(Photo by David Ramos/Getty Images)

Posted May 14 2018 05:56PM PDT

By JILL COLVIN Associated Press

WASHINGTON (AP) -- President Donald Trump on Monday defended his efforts to help a Chinese telecommunications company that violated U.S. sanctions "get back into business, fast," despite criticism from Democrats and Republicans that the company poses a national security risk.

"ZTE, the large Chinese phone company, buys a big percentage of individual parts from U.S. companies," Trump tweeted Monday. "This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi."

Trump over the weekend shocked many when he tweeted that he and Chinese President Xi Jinping were "working together" to give ZTE "a way to get back into business, fast," saying too many jobs in China were at stake after the U.S. government cut off access to its American suppliers.

The surprising overture to China marked a dramatic departure from Trump's rhetoric toward China during the campaign, when he said he would no longer allow China of "rape our country" and steal U.S. jobs.

The U.S. Commerce Department last month blocked ZTE Corp., a major supplier of telecom networks and smartphones based in southern China, from importing American components for seven years. The U.S. accused ZTE of misleading American regulators over sanctions against North Korea and Iran.

Commerce Secretary Wilbur Ross said during an appearance at the National Press Club in Washington Monday that "ZTE did do some inappropriate things. They've admitted to that."

But he added: "The question is: Are there alternative remedies to the one that we had originally put forward? And that's the area we will be exploring very, very promptly." He did not say what other options were being discussed.

Trump's unexpected announcement Sunday came as the two countries prepared for additional trade talks in Washington this week. Given past vows to stop the flow of U.S. jobs to China and what he's called unfair trade practices, Trump's seeming concern about Chinese jobs was something of a backflip.

"A reversal of the ZTE decision could temporarily tamp down trade tensions by allowing the Chinese to make concessions to the U.S. without losing face," said Eswar Prasad, a professor of trade policy at Cornell University. "Trump may have recognized that backing off on ZTE clears the path for him to claim at least a partial victory in the US-China trade dispute based on the concessions the Chinese seem prepared to offer."

But the move was panned by lawmakers on both sides of the aisle. Sen. Marco Rubio, R-Fla., tweeted Sunday that it would be "crazy" to allow ZTE to operate in the U.S. without tighter restrictions.

Top Senate Democrat Chuck Schumer accused Trump of "backing off" and "doing a 180 on China."

"What about jobs in America, Mr. President? What about the millions of jobs that are lost because of what China has done?" he asked, adding: "Why on earth would President Trump promise to help a Chinese telecom company that has flouted U.S. sanctions and whose practices are a risk to our national security?"

At the White House, spokesman Raj Shah said Trump's request for Ross to re-examine the issue was part of a "give and take" with the Chinese.

"It's a significant issue of concern to the Chinese government, you know, and in our bilateral relationship there's a give and take and we discuss these issues," he said. "Obviously this is part of a very complex relationship between the United States and China that involves economic issues, national security issues and the like."

Shah also pushed back on the idea that Trump was retreating from his campaign promise to be tough on China.

"This president has taken China to task for its unfair trade practices," he said.

ZTE, a company with more than 70,000 employees that has supplied some of the world's biggest telecom companies, said in early May that it had halted its main operations as a result of U.S. action.

"I've never seen a president step in and reverse an agency decision like this. It's not clear, of course, if he's planning to really reverse it or think of a solution in a larger context, but it is something that is just out of the norm," said Amanda DeBusk, the chair of the international trade and government regulations practice at the firm Dechert LLP.

The widening trade dispute between the world's two biggest economies has taken a toll on both sides. U.S. companies that export to China have had goods held up in China's ports. The block on ZTE was a heavy blow for the company but also hurt the U.S. companies it buys from. According to IDC data, ZTE sources more than 40 percent of its components from the U.S., creating a multibillion-dollar revenue stream for suppliers like Qualcomm and Intel.

China objected to ZTE's punishment at trade talks in Beijing this month, and the American delegation agreed to report them to Trump. ZTE has asked the department to suspend the seven-year ban on doing business with U.S. exporters. By cutting off access to U.S. suppliers of essential components such as microchips, the ban threatens ZTE's existence, the company has said.

China on Monday welcomed Trump's comments.

"We think highly of the U.S. statement regarding ZTE's case," said Lu Kang, a spokesman for China's foreign ministry. "We are currently in close communication over details of the implementation."

The foreign ministry said Vice Premier Liu He will visit the U.S. from Tuesday to Saturday for consultations with U.S. Treasury Secretary Steve Mnuchin.

The U.S. imposed the penalty on Shenzhen-based ZTE after finding that the company, which had already paid a $1.2 billion fine, not only failed to discipline employees that were involved, but paid them bonuses.